Rating agency revises Arcapita outlook

Manama, December 11, 2008

At the same time, we affirmed the 'BBB/A-2' long- and short-term counterparty credit ratings on the bank, said an official.

'The outlook revision reflects the deteriorated environment in which the bank operates, which is limiting its capacity to place investments with customers, as well as leading to a strained financial performance and funding position,' said Standard & Poor's credit analyst Mohamed Damak.

'In addition, the value of Arcapita's own investments - mainly in private equity and real estate - could decline and require some provisions.

'Negative rating factors include the bank's narrow business diversification and short track record, weakened funding and liquidity profile, and the deteriorated operating environment.

'The ratings reflect the bank's stand-alone creditworthiness and do not include any uplift for extraordinary external support.

'Nevertheless, we understand that strategic shareholders and investors will provide additional funding and capital to the bank in the near term. The bank is currently implementing a set of measures to strengthen its balance sheet and liquidity position.

'We would lower the ratings if the bank were not able to improve its funding profile, reduce its investment leverage, and achieve adequate profitability.

'The outlook could revert to stable after a significant improvement in investment leverage metrics and liquidity, as well as a resumption of good profitability,' the rating agency said.-TradeArabia News Service